Wine Sales Projected Growth at 6% Annually

Millennials and Gen Xers have pushed out baby boomers as the

largest consumer group in the wine market.

August 10, 2018

​NEW YORK – Wine sales have been growing, with total U.S. wine sales topping $32 billion in 2017, and a healthy sales projection of more than 6% annually through 2022 to hit $43 billion, Marketing Daily reports. Millennials and Gen Xers are driving this upward trend as their share of wine consumption soared by 8%, making them the largest consumer group in the wine market, according to L.E.K. Consulting.

Off-premises consumption of wine has risen, accounting for more than 80% of overall wine drinking—a much higher rate than for distilled spirits and beer, L.E.K. Consulting reports. Sales of fancy wine—the fine and premium wines—grew around 8% annually since 2012 and should reach $25 billion by 2022.

Direct-to-consumer (DTC) sales also are increasing, with shipments to customers from wineries closing in on $3.1 billion last year. The DTC market is anticipated to experience around 11% growth annually to hit $5.2 billion by 2022. Smaller wineries are pushing the DTC trend, which also has created packaging innovations such as canned, single-serve and boxed wine.

L.E.K.’s research shows that wine sales continued to grow even during the 2007–2008 recession, but new immigration policies could affect wine production by contributing to the industry’s labor shortage. Also, the industry continues to consolidate, with about a dozen suppliers in control of approximately 80% of the U.S. wine market by volume last year.

Last week we attended “The Really Big Expo” in Myrtle Beach, SC where there was much discussion about the growing and changing food service options in C-Stores. We attended NACS “Ideas 2 Go” program discussion which showcased emerging concepts that redefine convenience stores. Another huge topic of conversation is how the millennials are changing the way people eat and shop. Gone are the days of a dried hot dog spinning on a warmer as your only option. C-Stores are ‘destination spots’ – not just a place to fill your tank. Bigger selections and healthier options are becoming the norm.

If you’ve seen the 2013 NACS Ideas 2 Go program, then you’ll recognize many of the retailers the NY Times visited: Thai Pan, Flory’s and Seoul Food D.C. Each establishment was part of a segment on some of the best gourmet ethnic food found at a single-store operation, and the retailers behind these businesses that deliver exceptional food and innovative new ideas.

“Encouraged by the changing tastes of consumers and the potential for profit, a metamorphosis has taken place in at least 1,500 locations nationwide: at independent gas stations as well as those owned by oil giants like Shell and Exxon and convenience store chains like 7-Eleven,” writes the NY Times, adding that “fresh produce, elaborate sandwiches and even grilled tilapia and Korean bibimbap” are becoming more ubiquitous at the local convenience store.

These locations “are now cool to discover and tell others about,” Jeff Lenard, NACS vice president for strategic initiatives, told the news source. In fact, the industry has come a long way from food offers that merely served up punchlines for movies such as “National Lampoon’s Vacation,” where Chevy Chase laments, “I’m so hungry I could eat a sandwich from a gas station.”

“We definitely see, year after year, convenience stores presenting a competitive threat to quick-service outlets like McDonald’s,” Donna Hood Crecca, associate principal at Technomic, told the news source. Citing NACS State of the Industry data (newly released numbers will be presented next month at the State of the Industry Summit), in 2015, about 34% of in-store profits at convenience stores came from foodservice, up from 22% in 2010.

Larger convenience store chains, such as Sheetz, are adding drive-thrus and touchscreen ordering kiosks to accommodate their growing foodservice operations. The NY Times writes that there’s also “an increasing number of roving food trucks” at c-stores, such as Andrae’s Kitchen, in Walla Walla, Washington (hot dogs, hamburgers and sandwiches), and the Brew Pump, in Asheville, North Carolina (eight beers on tap, beer garden and sandwiches).

“Food industry analysts now consider convenience markets competition for some of the most powerful names in the restaurant industry,” writes the NY Times, adding that an estimated 10% of the 154,000-plus convenience stores across the country—a $575 billion industry—“could be described as food-forward.”

LEESBURG, Va. — Last summer, when two women were looking for a restaurant space in this Northern Virginia town of 48,000, one of the options held multiple enticements: It was affordable, it had a good location, the kitchen was fit for Asian cooking and it was in a gas station.

They signed on the dotted line and retained the name of the previous business, Thai Pan. Now, while the brick exterior is connected to a Liberty gas station and resembles a well-fortified bunker, the authentic Thai fare served in a charming dining room is drawing locals and adventuresome foodies from throughout the region.

“People come in here and say, ‘Wow, I never expected something like this,’” said Wilaivan Kammoongkun, one of the women behind the new Thai Pan.

The restaurant is part of a wave of gas stations and convenience stores capitalizing on a growing demand for fresh, healthful and convenient road food. Encouraged by the changing tastes of consumers and the potential for profit, a metamorphosis has taken place in at least 1,500 locations nationwide: at independent gas stations as well as those owned by oil giants like Shell and Exxon and convenience store chains like 7-Eleven.

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Wilaivan Kammoongkun helped open Thai Pan, which is attached to a Liberty gas station in Leesburg, Va., and serves authentic Thai fare. “People come in here and say, ‘Wow, I never expected something like this,’” she said.CreditAndrew Mangum for The New York Times

As a result, roller-grilled hot dogs and little packaged cakes of indefinite shelf life are, in many places, giving way to fresh produce, elaborate sandwiches and even grilled tilapia and Korean bibimbap. Popular food trucks and food carts are adding to the variety, many setting up shop just feet from gas pumps to take advantage of a steady stream of customers.

The locations “are now cool to discover and tell others about,” said Jeff Lenard, vice president for strategic initiatives at the National Association of Convenience Stores.

It certainly hasn’t always been this way. In fact, convenience store food regularly stood in as a joke. In the 1983 film “National Lampoon’s Vacation,” a hapless dad behind the wheel of a station wagon, played by Chevy Chase, laments, “I’m so hungry I could eat a sandwich from a gas station.”

Major oil companies still tend to shy away from the complicated and risky food business. But in the early 2000s, when a long-term decline in revenue from food, gas, cigarettes and other products approached troublesome levels, many gas station and convenience store owners started to rethink their business models.

Now, an estimated 10 percent of the 154,000 convenience stores across the country — a $31 billion industry — could be described as food-forward, the National Association of Convenience Stores says.

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Flory’s, a family-owned enterprise, has four locations. “We were apprehensive about doing this because we were not sure about customers wanting to eat in a convenience store,” said Jamy Flory, a co-owner and vice president of the business.CreditHiroko Masuike/The New York Times

The largest chain, 7-Eleven, with 10,900 stores in North America, has been polishing its game for more than a decade. Nearly all of its fresh food, heavy on fruits and vegetables, is prepared in regional commissaries.

The service station strategy appears to be working: In 2015, about 34 percent of in-store profits at convenience markets came from food and beverage service, up from 22 percent in 2010, according to the trade organization. Food industry analysts now consider convenience markets competition for some of the most powerful names in the restaurant industry.

“We definitely see, year after year, convenience stores presenting a competitive threat to quick-service outlets like McDonald’s,” said Donna Hood Crecca, associate principal at Technomic, a research company that follows the food industry.

Upgraded convenience stores are found across the country, especially on the East Coast and in the Midwest. Greater Dallas and the area around Harrisburg, Pa., are two hubs. The Tigris and Euphrates of the genre, though, might be the region in and around Washington. Here, one can feast on a variety of treats, including house-cured corned beef, Thai specialties, regional Mexican fare, homemade pizza, fried chicken and barbecue.

In 2012, Jon Rossler had the opportunity to permanently park a corned beef food truck at an Exxon station in Olney, Md., north of Washington.

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Thai Pan draws both local people and adventuresome foodies from throughout the region.CreditAndrew Mangum for The New York Times

The following year he moved inside, opening a spiffy 20-seat restaurant with faux brick walls, granite counters and large computer screen menus. Today, Corned Beef King goes through 150 pounds of corned beef and pastrami weekly, and 100 pounds of brisket. The business started with two employees; today there are 16.

“It’s wild,” Mr. Rossler said. “I think I may have gotten too big.”

Occupying part of an Exxon station in suburban Silver Spring, Md., is Seoul Food D.C., a cheerful, three-year-old art-festooned cafe serving gorgeous Korean dishes like bibimbap (sticky rice with vegetables, greens, a sunny-side-up egg and choice of protein) and the super bowl (rice, caramelized kimchi, spicy relish, two cheeses and Korean red sauce).

The experimentation also extends to the Hudson Valley town of Fishkill, N.Y., and the family enterprise Flory’s, which has four locations.

At first glance, especially at night, one of its stores — sleek and modern and large at 1,900 square feet — resembles a small casino with 14 gas pumps.

All food is made in-house: sandwiches, salads, soups and prepared meals. There is also a healthy fare section and make-your-own-milkshake machines. Two cooks toil in a small open kitchen preparing specialties like chili, lasagna, quesadillas, fried chicken and stuffed sole. Breakfast begins — with 16 types of coffee — at 4 a.m.

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Recent offerings at Flory’s included macaroni and cheese, vegetables, rice, chicken stew, fried chicken and French fries.CreditHiroko Masuike/The New York Times

Jamy Flory, a co-owner and vice president of the enterprise, said the concept had succeeded beyond his most sanguine expectations. When he first opened, he said, the meat and cheese purveyor Boar’s Head was reluctant to be associated with a gas station. Flory’s is now a regular customer.

“We were apprehensive about doing this because we were not sure about customers wanting to eat in a convenience store,” Mr. Flory said.

Taking cues from fast-food restaurants, many convenience stores are also providing drive-through windows and ordering kiosks. Sheetz, a chain of 541 gas stations based in Pennsylvania, has a store near Harrisburg that welcomes customers to relax outside at umbrella-shaded tables that afford the exhilarating view of automobiles being topped off.

There is also an increasing number of roving food trucks at service stations, among them Andrae’s Kitchen, in Walla Walla, Wash., (hot dogs, hamburgers and sandwiches), and the Brew Pump, in Asheville, N.C. (eight beers on tap, beer garden and sandwiches).

“We want to be about good food but also about some fun,” said Mr. Flory, proudly showing a customer his arctic-themed “beer cave” with a giant simulated polar bear on top. (It’s where beer inventory is kept.) “People get a kick out of it, so why not?”